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Two Zealous Forces Behind Bid for Warner Music

Edgar Bronfman Jr. seeks to redeem himself in the music industry, sources say. Haim Saban searches for bigger play.

November 22, 2003|Jeff Leeds | Times Staff Writer

How's this for a music business turnabout?

Two guys, one credited with writing a pop ballad for Celine Dion and the other with penning the cartoon theme song for "Inspector Gadget," could take over stewardship of the master recordings of Neil Young, Prince, Led Zeppelin and R.E.M.

Edgar Bronfman Jr., the Seagram Co. heir, billionaire TV mogul Haim Saban and their investment team could close a deal to purchase Time Warner Inc.'s vast global music operations this weekend. For both men, the sale of Warner Music Group represents a long-awaited chance to prove their mettle in the music business.

In the 1990s, Bronfman, now 48, built the world's biggest record conglomerate, Universal Music Group. He then sold Universal's entertainment empire to Vivendi in a deal that turned into a disaster and has been eager to redeem himself, according to people who know him.

Saban, 59, a onetime bass guitarist in an Israeli rock band, created the "Mighty Morphin Power Rangers" TV empire and earned a fortune in music publishing, and later cable TV. He has been sniffing around song catalogs and other music assets for years in search of a bigger play.

The Warner Music auction comes as some media companies have been scrambling to exit the record industry, which is suffering at the hands of online piracy, CD burning and nose-diving sales. Some hope consolidation will buy time until the industry rebounds.

Warner Music has had another suitor: British music giant EMI Group. But Time Warner thought a tie-up with an existing record company would face tough regulatory scrutiny, sources said, particularly with antitrust officials reviewing a music merger plan from Sony Corp. and Bertelsmann at the same time.

Selling to the Bronfman-Saban team appeared safer because it wouldn't shrink the number of competitors in the recorded music business.

The team offered more than $2.5 billion for Time Warner's recorded music and music publishing businesses, and gave Time Warner the option of up to a 20% stake and the chance to purchase equity at a discount down the road, sources said.

If a deal isn't sealed by Sunday night, Time Warner is likely to return its focus to EMI's bid.

Should the Bronfman-Saban team prevail, leveraged-buyout specialist Thomas H. Lee would be the biggest investor, sources said, putting up an estimated $600 million. Saban is expected to put in $100 million to $200 million, sources said, and Bronfman is expected to chip in $50 million to $100 million.

Bronfman is the key deal maker, and he apparently linked up with Saban through some common private equity banking executives, sources said.

Saban probably would remain a passive investor, sources close to the deal said. They said he would have a particular interest in the Warner Chappell publishing arm, to which he sold his own catalog of publishing rights for a reported $15 million. Warner Chappell has a catalog of more than 1 million copyrights, including "Happy Birthday" and "Rhapsody in Blue."

Close to Warner Chappell chief Les Bider, Saban had been in negotiations to take over some royalty collections for the Warner Chappell operation, sources said.

For his part, Bronfman probably would become chairman and take a major role in the record company's operation, as he did at Universal Music, where he weighed in on subjects from online strategies to album lyrics.

Bronfman and Saban declined to comment.

The heir to the Seagram liquor fortune, Bronfman has long dabbled in songwriting. In 1995, after tiring of the beverage business and investments in chemicals, he plunged his family's fortune into entertainment, spending $5.7 billion for a controlling interest in what was then MCA Inc., parent of Universal Studios. He paid $10.4 billion to buy Dutch music giant PolyGram, fusing it with MCA's operation to create the world's biggest record conglomerate.

Bronfman made an enormous bet on the music business at what now appears to have been the market's top. Barely a year after Seagram unveiled its PolyGram deal, the industry-altering Napster file-sharing network broke onto the music scene, and consumers worldwide became accustomed to getting free songs. What was a $40-billion-a-year global music business has been unraveling ever since. This year sales are expected to fall to about $30 billion.

Bronfman also helped Seagram's Universal Studios rebound at the box office, but he never won much acceptance in Hollywood's establishment. Some detractors labeled him a dilettante, especially after he co-wrote the title song of the Universal film "Daylight" under the pseudonym Sam Roman and the Celine Dion hit single "To Love You More," under the name Junior Miles.

In 2000, Bronfman sold Seagram and the Universal properties to Vivendi for $34 billion in stock. His shares plummeted as Vivendi struggled with soaring debt and the collapse of Chairman Jean-Marie Messier's vision to create an entertainment conglomerate.

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